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Published by bhushanvelapure

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Categories:Topics, Art & Design
Published by: bhushanvelapure on Feb 22, 2011
Copyright:Attribution Non-commercial


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[Type text] Page 1
The term µReinsurance, also termed as insurance of insurance¶. Means that aninsurer who has assumed a large risk may arrange with another insurer to insure a proportion of the insured risk. In other words, in the event of loss, if it would be beyond the capacity of the insurer than this reinsurance process is restored to. Inreinsurance, therefore, one insurer insures the risk which has been undertaken byanother insurer. The original insurer who transfers a part of the insurance contractis called the reinsured and the second insurer is called the reinsurer. Of course thereinsurance has to pay reinsurance premium for risk shifted. For example, a manwishing to insure his premium for 10 lakhs goes to an insurance company, whichwill accept the risk if it is satisfied as to the condition of the property. But if it itsown limit is probably Rs 5 lakhs, it will arrange with another company to reinsureor to take up so much of the risk as exceeds its limits, i.e. Rs 5 lakhs, so that if thehouse is burnt down the original insurer would pay the owner Rs 10 lakhs. Butthey would be recouped 5 lakhs, by the reinsurance offices. To be effective, thereinsurance policy must be formulated after carefully considering all aspects of the situation to which it is to be applied.
[Type text] Page 2
Reinsurance is a means by which an insurance company can protect itself against the risk of losses with other insurance companies. Individuals andcorporations obtain insurance policies to provide protection for various risks(hurricanes, earthquakes, lawsuits, collisions, sickness and death, etc.).Reinsurers, in turn, provide insurance to insurance companies. It is a financialmanagement tool. It is always behind the high quality insurance program or acomplex commercial risk of any good insurer. Reinsurance industries aremaintaining upward surge all round growth, both in the domestic and globalfronts in the last few years. The untapped, both in life and non ± life insurance, particularly in growing economies like India and china, is the center of attractionto leading players in insurance and reinsurance, thanks to globalizations andliberalizations of financial services particularly in last decades. It is a tool of risk management, mutually support and supplement each other in providing risk mitigation to the individuals and organizations at micro level and to the country.Reinsurance is instrument of risk transfer and risk financing. Reinsurance can bedescribed as contract made between an insurance company (insurer) and a third party (reinsurer) where in the later will protect the former by paying lossessustained by it under the original contract of insurance, unlike primary insurance,the reinsurance mainly deals with catastrophic risk which are not only highlyunpredictable but have the potential capacity to cause huge devastation therebythreatening the solvency of the insurance company.
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Reinsurance is a transaction in which one insurer agrees, for a premium, toindemnify another insurer against all are part of the loss that insurer may sustainunder its policy or policy or policies of insurance. The company purchasingreinsurance is known as the ceding insurer: the company selling reinsurance isknown as the assuming insurer, or, more simply, the reinsurer. Reinsurer can also be described as the ³insurance of insurance companies´ Reinsurance providesreimbursement to the ceding insurer for lasses covered by the reinsuranceagreement. It enhances the fundamental objectives of insurance to spread the risk so that no single entity finds itself saddled with a final burden beyond its abilityto pay. Reinsurance can be acquired directly from a reinsurance intermediary.

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